<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996.
Commission file number 000-22150
---------
LANDRY'S SEAFOOD RESTAURANTS, INC.
---------------------------------------------------------
(Exact name of the registrant as specified in its charter)
Delaware 74-0405386
- ----------------------- --------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1400 Post Oak Blvd., Suite 1010, Houston, Texas 77056
---------------------------------------------------------
(Address of principal executive offices)
(713) 850-1010
-----------------------------------------------
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No___
---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
As of July 30, 1996 there were
23,189,340 shares of $0.01 par value
common stock outstanding.
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
INDEX
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
PAGE
PART I. FINANCIAL INFORMATION NUMBER
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Item 1. Financial Statements 2
Condensed Unaudited Consolidated Balance Sheets at June 30, 1996 and
December 31, 1995 3
Condensed Unaudited Consolidated Statements of Income for the Three Months
and Six Months ended June 30, 1996 and June 30, 1995 4
Condensed Unaudited Consolidated Statements of Stockholders' Equity
for the Six Months Ended June 30, 1996 5
Condensed Unaudited Consolidated Statements of Cash Flows for the Three
and Six Months Ended June 30, 1996 and June 30, 1995 6
Notes to Condensed Unaudited Consolidated Financial Statements 7-10
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations 11-17
- --------------------------------------------------------------------------------------------------------
PART II. OTHER INFORMATION
- -------------------------------------------------------------------------------------------------------
Item 1. Legal Proceedings Not Applicable
Item 2. Changes in Securities Not Applicable
Item 3. Defaults upon Senior Securities Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 5. Other Information Not Applicable
Item 6. Exhibits and Reports on Form 8-K 18
- -------------------------------------------------------------------------------------------------------
Signatures 19
- -------------------------------------------------------------------------------------------------------
1
</TABLE>
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The accompanying condensed unaudited consolidated financial statements have
been prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of the Company, all
adjustments (consisting only of normal recurring entries) necessary for fair
presentation of the Company's results of operations, financial position and
changes therein for the periods presented have been included.
2
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
CONDENSED UNAUDITED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 1996 1995
- --------------- ------------- ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $118,593,893 $ 16,628,704
Accounts receivable--trade and other 1,954,576 1,162,099
Loan Receivable 5,756,774 ---
Inventory 2,362,848 2,780,931
Other current assets 2,271,500 3,146,626
------------ ------------
Total current assets 130,939,591 23,718,360
PROPERTY AND EQUIPMENT, net 128,080,032 111,569,804
GOODWILL, net of amortization of $917,000
and $849,000, respectively 3,137,526 3,205,094
OTHER ASSETS, net 1,898,746 1,508,105
------------ ------------
Total assets $264,055,895 $140,001,363
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- --------------------------------------
CURRENT LIABILITIES:
Accounts payable $13,392,431 $ 11,176,551
Accrued liabilities 5,301,001 3,721,325
Income taxes payable 4,061,228 ---
Current portion of long-term notes
and other obligations 254,002 299,222
------------ ------------
Total current liabilities 23,008,662 15,197,098
LONG-TERM NOTES AND OTHER OBLIGATIONS,
NON-CURRENT 290,962 368,349
DEFERRED INCOME TAXES & OTHER LIABILITIES 2,226,046 2,226,046
------------ ------------
Total liabilities 25,525,670 17,791,493
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value, 2,000,000 shares
authorized, none outstanding --- ---
Common stock, $0.01 par value, 60,000,000 shares
authorized, 23,121,360 and 18,050,520 issued and
outstanding, respectively 231,214 180,505
Additional paid-in capital 214,575,641 106,242,850
Retained earnings 23,723,370 15,786,515
------------ ------------
Total stockholders' equity 238,530,225 122,209,870
------------ ------------
Total liabilities and stockholders' equity $264,055,895 $140,001,363
============ ============
The accompanying notes are an integral part of these condensed unaudited financial statements.
</TABLE>
3
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
--------------------------- ---------------------------
June 30, June 30,
1996 1995 1996 1995
----- ----- ----- -----
<S> <C> <C> <C> <C>
REVENUES $46,179,788 $27,734,866 $80,999,384 $48,347,481
OPERATING COSTS AND EXPENSES:
Cost of sales 14,094,241 8,562,289 24,570,301 14,935,332
Restaurant labor 11,749,396 7,040,266 20,623,130 12,301,042
Other restaurant operating expenses 9,504,388 5,928,473 16,769,392 10,349,556
Depreciation and amortization 2,423,116 1,220,364 4,556,017 2,262,012
General and administrative expenses 1,510,990 1,258,056 2,783,652 2,138,750
----------- ----------- ----------- -----------
Total operating costs and expenses 39,282,131 24,009,448 69,302,492 41,986,692
----------- ----------- ----------- -----------
OPERATING INCOME 6,897,657 3,725,418 11,696,892 6,360,789
OTHER (INCOME) EXPENSE:
Interest (income) expense, net (666,807) (621,905) (824,911) (798,193)
Other, net 62,313 8,413 120,467 25,096
----------- ----------- ----------- -----------
Total other (income) expense (604,494) (613,492) (704,444) (773,097)
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES 7,502,151 4,338,910 12,401,336 7,133,886
PROVISION FOR INCOME TAXES 2,700,774 1,540,313 4,464,481 2,532,529
----------- ----------- ----------- -----------
NET INCOME $ 4,801,377 $ 2,798,597 $ 7,936,855 $ 4,601,357
=========== =========== =========== ===========
NET INCOME PER SHARE $0.23 $0.16 $0.40 $0.28
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES AND COMMON SHARE
EQUIVALENTS OUTSTANDING 20,900,000 17,128,000 19,950,000 16,422,000
=========== =========== =========== ===========
The accompanying notes are an integral part of these condensed unaudited financial statements.
</TABLE>
4
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
CONDENSED UNAUDITED CONSOLIDATED STATEMENT OF
STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Additional
--------------------------- Paid-In Retained
Shares Amount Capital Earnings Total
-------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1995 18,050,520 $180,505 $106,242,850 $15,786,515 $122,209,870
Net income --- --- --- 7,936,855 7,936,855
Issuance of Common stock,
net of offering costs 4,890,000 48,900 105,464,100 --- 105,513,000
Exercise of stock options and
income tax benefit 180,840 1,809 2,868,691 --- 2,870,500
Balance, June 30, 1996 ---------- -------- ------------ ----------- ------------
23,121,360 $231,214 $214,575,641 $23,723,370 $238,530,225
========== ======== ============ =========== ============
The accompanying notes are an integral part of these condensed unaudited financial statements.
</TABLE>
5
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
Three Months Ended Six Months Ended
------------------------------ ---------------------------
June 30, June 30,
1996 1995 1996 1995
--------- --------- -------- --------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 4,801,377 $ 2,798,597 $ 7,936,855 $ 4,601,357
Adjustments to reconcile net income to net
cash provided by operating activities--
Depreciation and amortization 2,423,116 1,220,364 4,556,017 2,262,012
Change in assets and liabilities-net
and other 4,321,627 2,943,745 1,988,708 5,337,663
------------ ------------ ------------ ------------
Total adjustments 6,744,743 4,164,109 6,544,725 7,599,675
Net cash provided by operating ------------ ------------ ------------ ------------
activities 11,546,120 6,962,706 14,481,580 12,201,032
------------ ------------ ------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment additions (9,511,243) (17,296,896) (19,716,362) (29,926,187)
Other assets (204,877) (21,382) (511,532) ( 39,610)
------------ ------------ ------------ ------------
Net cash used in investing (9,716,120) (17,318,278) (20,227,894) (29,965,797)
activities ------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable and other long-term
obligations (36,618) (104,903) (122,607) (230,183)
Net proceeds from sale of common stock 105,513,000 49,968,756 105,513,000 49,968,756
Proceeds from exercise of stock options 1,068,680 41,760 2,321,110 542,760
Net cash provided by (used in) ------------ ------------ ------------ ------------
financing activities 106,545,062 49,905,613 107,711,503 50,281,333
------------- ------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 108,375,062 39,550,041 101,965,189 32,516,568
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 10,218,831 12,468,602 16,628,704 19,502,075
------------ ------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $118,593,893 $ 52,018,643 $118,593,893 $ 52,018,643
============= ============ ============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash payments during the period for--
Income taxes $ 70,500 $1,807,600 $ 88,300 $ 3,053,500
Interest 15,700 20,600 31,400 40,900
The accompanying notes are an integral part of these unaudited condensed financial statements.
</TABLE>
6
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The financial statements included herein have been prepared by the
Company without audit, except for the consolidated balance sheet as of December
31, 1995. The financial statements include all adjustments, consisting of
normal, recurring adjustments and accruals, which the Company considers
necessary for fair presentation of its financial position and results of
operations. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. This information is contained in the
Company's December 31, 1995, consolidated financial statements filed with the
Securities and Exchange Commission on Form 10-K.
Cash and Cash Equivalents
For purposes of the condensed statements of cash flows, the Company
considers all highly liquid investments with original maturities of three months
or less to be cash equivalents.
Goodwill and Non-Compete Agreements
Goodwill and non-compete agreements are amortized over 30 years and 15
years (or the life of the related agreement), respectively.
Earnings per Share
Net income per share has been computed by dividing net income by the
weighted average common and common share equivalents outstanding, if material.
Common stock equivalent shares, which relate to stock options, are included in
the weighted average using the treasury stock method, when the effect is
material and dilutive.
New Accounting Principles
In October 1995, SFAS No. 123 " Accounting for Stock-Based
Compensation" was issued. This statement establishes a fair value based method
of accounting for stock-based compensation plans. The Company currently
accounts for its stock-based compensation plans under Accounting Principles
Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees."
Pursuant to the new standard the Company will provide certain pro forma
disclosures related to its stock based compensation in the notes to its
financial statements for the year ending December 31, 1996.
7
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
2. Recent Developments
On April 18, 1996, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") pursuant to which a wholly-owned subsidiary of
the Company would merge with and into Bayport Restaurant Group, Inc. ("Bayport")
("PORT"/NASDAQ), resulting in Bayport becoming a wholly-owned subsidiary of the
Company (the "Merger"). Bayport operates 17 full-service casual dining seafood
restaurants under the name "The Crab House". Bayport's Crab House restaurants
are located primarily in Florida. Prior to the Merger, the Company has agreed
to loan Bayport up to $11 million to be used by Bayport to continue construction
of four additional Crab House restaurants, of which two restaurants have opened.
As of July 31, 1996 the Company had advanced Bayport $6,897,000 under the
Bayport Loan Agreement. Funding by the Company of the Bayport construction loan
will be from available capital under the Company's existing credit lines, and is
not expected to impact the Company's own development and expansion plans in any
manner.
Under the terms of the Merger Agreement, the Company will issue an aggregate
number of shares of Landry's Common Stock which is equal to .2105 (the "Exchange
Ratio"), subject to adjustment, multiplied by the number of outstanding shares
of Bayport Common Stock. Based on 9,655,599 shares of Bayport Common Stock
issued and outstanding on May 6, 1996, the Company will issue approximately
2,032,503 shares of Landry's Common Stock for the merger, subject to
adjustments, including an equivalent share price collar adjustment above $22.00
and below $15.00 per share of Landry's Common Stock for the average of the daily
closing prices for a specified number of trading days. Shares of outstanding
Bayport Preferred Stock, aggregating 2,136,499 shares as of May 6, 1996, will be
exchanged for approximately 112,433 shares of the Company's newly issued
Preferred Stock, subject to equivalent adjustments. Landry's Preferred Stock
will have essentially the same rights as the Bayport Preferred Stock, among
which will be conversion rights into Landry's Common Stock, on a one-for-one
basis, after the merger and exchange. In addition, the Exchange Ratio is
subject to a downward adjustment (i.e. providing for issuance of fewer Landry's
shares) in the event that Bayport's costs of completing construction of four
restaurants presently under construction exceed $13 million and/or if pre-
opening costs relating to these four restaurants exceed $1.65 million. The
Merger is expected to close in the Company's third quarter, ending on September
30, 1996. Costs and charges related to the Merger are expected to be
significant and are currently estimated to approximate $5 to $6 million of cash
charges and $10 to $14 million of non-cash charges; such costs and charges will
be expensed in the quarter in which the Merger is consummated or abandoned.
In May 1996, the Company completed a public offering of 4,890,000 shares of the
Company's Common Stock. Net proceeds of the common stock offering, of
approximately $105,000,000, will be used to fund the Company's existing planned
expansion and development programs of Landry's Seafood House and Joe's Crab
Shack restaurants and general corporate purposes, and if the Merger
8
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
is consummated, to fund expansion of Crab House restaurants and repayment of
Bayport related outstanding debt and merger costs.
3. Loan Receivable
The Company entered into a Loan Agreement with Bayport, pursuant to which
the Company agreed to loan Bayport up to $11.0 million to finance the continued
construction of four additional restaurants. As June 30, 1996, the Company has
loaned Bayport $5,756,774. Outstanding indebtedness under the Loan Agreement
bears interest at the prime rate, as published in The Wall Street Journal, plus
2%. Interest under the Loan Agreement is payable monthly. Subsequent advances in
varying amounts, will be made on or about the fifteenth day of each month
subject to the satisfaction of certain conditions contained in the loan
agreement. The loan to Bayport is secured by certain collateral, including
certain existing restaurants of Bayport and certain restaurants currently being
constructed by Bayport. The Company has the right to convert the loan to Bayport
into ownership of such collateral, if the Merger is not consummated under
certain circumstances, by paying the remaining unfunded loan balance.
4. Accrued Liabilities
Accrued liabilities are comprised of the following:
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
------------- -----------------
<S> <C> <C>
Payroll and related costs $ 1,025,512 $ 813,747
Deferred income taxes 200,000 200,000
Taxes, other than payroll and income
taxes 2,035,235 1,298,875
Other 2,040,254 1,408,703
----------- -----------
$ 5,301,001 $ 3,721,325
============ ===========
</TABLE>
5. Debt
The Company has a $25 million unsecured line of credit from a bank which
matures in May 1997, and is available for expansion and other general corporate
purposes. The terms of the line of credit require periodic or monthly interest
payments; interest on borrowings at the bank's reference rate, as defined, or an
Offshore Rate plus 3/4%, as defined; and, for the Company to maintain tangible
net worth, as defined, of $90 million. Moreover, the terms prohibit the Company
from incurring losses in two consecutive quarters. The Company had $5,756,774
borrowed under the line
9
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
of credit as of June 30, 1996, to fund the advances under the Bayport Loan
Agreement.
6. Contingencies
The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business. Management believes, based on discussions with
its legal counsel and in consideration of reserves recorded, that the outcome of
all legal actions will not have a material adverse effect upon the consolidated
financial position and results of operations of the Company.
10
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Introduction
The Company's operations may be impacted by changes in federal tax and
other governmental policies which affect the deductibility of business and
entertainment expenses and levels of disposable income. The Revenue
Reconciliation Act of 1993 included matters which could impact the restaurant
business and the Company's operations. These included a reduction in the
business tax deduction available for restaurant meals, as well as an increase in
the tax rate for individuals, with a greater increase for those persons who are
in the higher income bracket and, therefore, could reasonably be expected to eat
in the Company's restaurants on a more frequent basis. The Company can make no
prediction as to the ultimate effect of the Revenue Reconciliation Act of 1993
on the Company's business and operation; however, the Company does not believe
the Revenue Reconciliation Act of 1993 will significantly affect its on-going
business. Additionally, on-going proposals mandating medical and parental leave
benefits, requiring employers to provide health insurance to part-time employees
and increases in the federal or certain statue minimum wage will, if enacted,
increase the Company's employee costs.
If the Merger is consummated, the Company would recognize a one-time
charge that it believes will be approximately $5 million to $6 million of cash
charges and $10 to $14 million of non-cash charges. These charges would be
recorded in the quarter in which the Merger is consummated (expected to be the
third quarter of 1996). The actual expenses would be significant for such
quarter. In addition, the Company's restaurant base would increase
significantly through the acquisition of the Bayport restaurants pursuant to the
Merger. Such restaurants have materially different profit margins, costs to
construct, costs of sales as percentages of restaurants sales, operation
expenses, and other restaurant performance factors than the Company's
restaurants. The Company would attempt to reduce construction and operation
costs of the Bayport restaurants without reducing the quality of their service
or food. However, there can be no assurances that the Company would be able to
operate the Bayport restaurants in a manner that is different from the way such
restaurants are currently being constructed and operated. As a result, the
Company's profit margin, cost to construct, cost of sales as percentages of
restaurant sales, operating expenses and other restaurant performance factors
may be materially different than the Company's on a stand-alone basis.
The report contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act, and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), which are intended to be
covered by the safe harbors created thereby. Investors are cautioned that all
forward-looking statements involve risks and uncertainty, including without
limitation, the ability of the Company to continue its accelerated expansion
strategy (including the consummation of the Merger), changes in costs of food,
labor, and employee benefits, the ability of the Company to continue to
11
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
acquire prime locations at acceptable lease or purchase terms, as well as
general market conditions, competition, and pricing. Although the Company
believes that the assumptions underlying the forward-looking statements
contained herein are reasonable, any of the assumptions could be inaccurate, and
therefore, there can be no assurance that the forward-looking statements
included in this report will prove to be accurate. In light of the significant
uncertainties inherent in the forward-looking statements included herein, the
inclusion of such information should not be regarded as a representation by the
Company or any other person that the objectives and plans of the Company will be
achieved.
Results of Operations
The following table sets forth the components of income from
operations as a percentage of revenues for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0%
Operating costs and expenses:
Cost of sales 30.5 30.9 30.3 30.9
Restaurant labor 25.4 25.4 25.5 25.5
Other restaurant operating expenses 20.6 21.4 20.7 21.4
Depreciation and amortization 5.3 4.4 5.6 4.6
General and administrative expenses 3.3 4.5 3.5 4.4
----- ----- ----- -----
Total operating costs and expenses 85.1 86.6 85.6 86.8
----- ----- ----- -----
Operating income 14.9 13.4 14.4 13.2
Other (income) expense:
Interest (income) expense, net (1.4) (2.2) (1.0) (1.7)
Other, net 0.1 - 0.1 0.1
----- ----- ----- -----
Total other (income) expense, net (1.3) (2.2) (0.9) 1.6
----- ----- ----- -----
Income before income taxes 16.2 15.6 15.3 14.8
Provision for income taxes 5.8 5.5 5.5 5.3
----- ----- ----- -----
Net income 10.4% 10.1% 9.8% 9.5%
===== ===== ===== =====
</TABLE>
12
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
Three Months Ended June 30, 1996 Compared to Three Months Ended June 30, 1995
Revenues increased $18,444,922, or 66.5%, from $27,734,866 to
$46,179,788 in the three months ended June 30, 1996, compared to the three
months ended June 30, 1995. The increase in revenue was attributable to
revenues from new restaurant openings. There was a nominal change in revenues
from units opened prior to 1995. Several of the Company's restaurants that
opened during late 1994 and early 1995 opened at volumes in excess of the
Company's average unit volumes. Subsequently, however, the Company has
experienced a moderation of their initial unit volumes.
As a primary result of increased revenues, cost of sales increased
$5,531,952, or 64.6%, from $8,562,289 to $14,094,241 in the three months ended
June 30, 1996 compared to the same period in the prior year. Cost of sales as a
percentage of revenues for the three months ended June 30, 1996 decreased to
30.5% from 30.9% in 1995. The decrease in cost of sales as a percentage of
revenues reflects favorable product prices and better management cost controls
in 1996.
Restaurant labor expenses increased $4,709,130, or 66.9%, from
$7,040,266 to $11,749,396 in the three months ended June 30, 1996 compared to
the same period in the prior year. Restaurant labor expenses as a percentage of
revenues for three months ended June 30, 1996, remained flat at 25.4%.
Other restaurant operating expenses increased $3,575,915, or 60.3%,
from $5,928,473 to $9,504,388 in the three months ended June 30, 1996, compared
to the same period in the prior year, as a result of increased revenues and the
opening of new restaurants since June 30, 1995. Such expenses decreased as a
percentage of revenues to 20.6% from 21.4% primarily due to revenue growth
exceeding the increase in other restaurant operating expenses, and tighter
controls on various cost and expense categories.
Depreciation and amortization expenses increased $1,202,752 or 98.6%
from $1,220,364 to $2,423,116 in the three months ended June 30, 1996, compared
to the same period in the prior year. The increase was primarily due to the
addition of new restaurants and purchases of new equipment.
General and administrative expenses increased $252,934, or 20.1%, from
$1,258,056 to $1,510,990 compared to the same period of the prior year, and
decreased as a percentage of revenues to 3.3% from 4.5%. The dollar increase
resulted primarily from increased office personnel, salaries and travel to
support the Company's expansion plans. The percentage of revenues decrease was
attributable to particularly strong revenue growth exceeding the increase in
general and administrative expense for the comparable three month period.
13
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
The increase in net interest income of $44,902 and change in other
expense, net of $53,900, are not deemed significant.
Provision for income taxes increased by $1,160,461 from $1,540,313 in
1995 to $2,700,774 in 1996 primarily due to the change in the Company's income.
The effective income tax rates increased to approximately 36% from the 1995
effective tax rates due to a higher effective federal rate in 1996 as compared
to 1995, and as a result of higher state income taxes.
Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1995
Revenues increased $32,651,903, or 67.5%, from $48,347,481 to
$80,999,384 in the six months ended June 30, 1996, compared to the six months
ended June 30, 1995. The increase in revenue was attributable to revenues from
new restaurant openings. There was a nominal change in revenues from units
opened prior to 1995. Several of the Company's restaurants that opened during
late 1994 and early 1995 opened at volumes in excess of the Company's average
unit volumes. Subsequently, however, the Company has experienced a moderation
of their initial unit volumes.
As a primary result of increased revenues, cost of sales increased
$9,634,969, or 64.5%, from $14,935,332 to $24,570,301 in the six months ended
June 30, 1996 compared to the same period in the prior year. Cost of sales as a
percentage of revenues for the six months ended June 30, 1996 decreased to 30.3%
from 30.9% in 1995. The decrease in cost of sales as a percentage of revenues
reflects favorable product prices and better management cost controls in 1996.
Restaurant labor expenses increased $8,322,088, or 67.7%, from
$12,301,042 to $20,623,130 in the six months ended June 30, 1996 compared to the
same period in the prior year. Restaurant labor expenses as a percentage of
revenues for six months ended June 30, 1996, remained flat at 25.5%.
Other restaurant operating expenses increased $6,419,836, or 62.0%,
from $10,349,556 to $16,769,392 in the six months ended June 30, 1996, compared
to the same period in the prior year, as a result of increased revenues and the
opening of new restaurants since June 30, 1995. Such expenses decreased as a
percentage of revenues to 20.7% from 21.4% primarily due to revenue growth
exceeding the increase in other restaurant operating expenses, and tighter
controls on various cost and expense categories.
Depreciation and amortization expenses increased $2,294,005 or 101.4%
from $2,262,012 to $4,556,017 in the six months ended June 30, 1996, compared to
the same period in the prior year. The increase was primarily due to the
addition of new restaurants and purchases of new equipment.
14
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
General and administrative expenses increased $644,902, or 30.2%, from
$2,138,750 to $2,783,652 compared to the same period of the prior year, and
decreased as a percentage of revenues to 3.5% from 4.4%. The dollar increase
resulted primarily from increased office personnel, salaries and travel to
support the Company's expansion plans. The percentage of revenues decrease was
attributable to particularly strong revenue growth exceeding the increase in
general and administrative expense for the comparable six month period.
The increase in net interest income of $26,718 and change in other
expense, net of $92,371, are not deemed significant.
Provision for income taxes increased by $1,931,952 from $2,532,529 in
1995 to $4,464,481 in 1996 primarily due to the change in the Company's income.
The effective income tax rates increased to approximately 36% from the 1995
effective tax rates due to a higher effective federal rate in 1996 as compared
to 1995, and as a result of higher state income taxes.
Liquidity and Capital Resources
The Company does not have significant trade receivables or inventory
and receives trade credit based upon negotiated terms in purchasing food and
supplies. In connection with its Initial Public Offering, the Company received
$17,122,745 in net proceeds in August 1993. In March 1994, the Company received
$37,457,255 from a second common stock offering and the exercise of certain
stock options, and in April 1995, the Company received approximately $50,000,000
from a third common stock offering. In a fourth common stock offering in May
1996 the Company received approximately $105,000,00. Historically, the Company
has leased many of its restaurant locations and pursued a strategy of controlled
growth, financing its expansion principally from proceeds from common stock
offerings, operations, operating cash flow and to a lesser extent, borrowings.
In 1994, 1995 and the six months ended June 30, 1996, the Company spent
$31,908,332, $71,332,802, and $19,716,362 respectively, on capital expenditures,
which was funded in part out of cash flows from operations of $9,813,944,
$18,719,141, and $14,481,580 respectively, plus borrowings in 1993 of $1,212,767
and from proceeds of the common stock offerings. Payments on notes payable and
other long-term obligations amounted to $1,474,745, $320,109, and $122,607 in
1994, 1995 and the six months ended June 30, 1996, respectively.
The Company originally planned to open approximately 26 restaurants
during 1995 and 1996. As of July 31, 1996 the Company had opened 33 restaurants
in 1995 and to date in 1996. The Company's current development plan is to
operate a total of approximately 75 restaurants by December 31, 1997 (excluding
restaurants that may be acquired pursuant to the Merger,). If the Merger is not
consummated the Company anticipates further accelerating its expansion plans.
Excluding real estate costs and pre-opening expenses, the average cash
investment to open the
15
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
Company's new restaurants in 1995 was approximately $2.6 million. However, the
average cash investment, excluding real estate costs and pre-opening expenses
for the last six restaurants opened by the Company was $1.8 million. The
Company expects that its average investments for units opened in 1996 will
approximate $2.0 million. Individual unit investment costs could vary from
management's expectations due to a variety of factors. Moreover, average unit
investment costs are dependent upon many factors including competition for
sites, location, construction costs, unit size and the mix of conversions,
build-to-suit and leased locations. The Company currently anticipates that it
will continue to purchase a portion of its new restaurant locations, which are
expected to be more costly than leased locations. The Company believes that
existing cash balances, the proceeds from common stock offerings, cash generated
from operations and potential financing sources will be sufficient to satisfy
the Company's working capital and capital expenditure requirements through 1997,
including working capital and capital expenditure requirements resulting from
the consummation of the Merger.
The Company has a $25 million line of credit which is subject to
renewal in May 1997. The Company had $5,756,774 borrowed under the line of
credit as of June 30, 1996 to fund the advances under the Bayport Loan
Agreement.
On April 18, 1996, the Company entered into a loan agreement with
Bayport (the Bayport Loan Agreement) pursuant to which the Company agreed to
loan to Bayport up to $11 million to be used by Bayport to finance the continued
construction of four Crab House restaurants. The Company has a Loan Receivable
balance from Bayport of $5,756,774 at June 30, 1996 and has advanced a total of
$6,897,000 under the Bayport Loan Agreement as of July 31, 1996. Subsequent
advances in varying amounts, will be made on or about the fifteenth day of each
month subject to the satisfaction of certain conditions contained in the loan
agreement. The loan to Bayport is secured by certain collateral, including
certain existing restaurants of Bayport and certain restaurants currently being
constructed by Bayport. The Company has the right to convert the loan to Bayport
into ownership of such collateral, if the Merger is not consummated under
certain circumstances, by paying the remaining unfunded loan balance.
Seasonality and Quarterly Results
The Company's business is seasonal in nature, with revenues and, to a
greater degree, operating profits being lower in the first and fourth quarters
than in other quarters due to the Company's reduced winter volumes. The timing
of unit openings can and will affect quarterly results. To a degree, the
Company anticipates some moderation in revenues from the initial volumes of
units opened in the first and fourth quarters. The timing of unit openings can
and will affect quarterly results.
16
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
Impact of Inflation
Management does not believe that inflation has had a significant
effect on the Company's operations during the past several years. Management
believes the Company has historically been able to pass on increased costs
through menu price increases, but there can be no assurance that it will be able
to do so in the future. Future increases in land and construction costs could
adversely affect the Company's ability to expand.
17
<PAGE>
LANDRY'S SEAFOOD RESTAURANTS, INC.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS Not Applicable
ITEM 2. CHANGES IN SECURITIES Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Stockholders was held on June 21, 1996.
At the Meeting, the following actions were taken by the stockholders:
Tilman J. Fertitta, E.A. "Al" Jaksa, Jr., Steven L. Scheinthal, Paul S.
West, James E. Masucci and Joe Max Taylor were elected as Directors to
serve until the Annual Meeting in 1997 or until their successors are
elected or their earlier resignation, removal from office or death.
The Company's Certificate of Incorporation was amended to increase the
number of authorized shares of Common Stock, par value $0.01 from 30
million shares to 60 million shares.
ITEM 5. OTHER INFORMATION Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) EXHIBITS -
27- FINANCIAL DATA SCHEDULE
(B) REPORTS ON FORM 8-K - NONE
18
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Landry's Seafood Restaurants, Inc.
(Registrant)
/s/ Tilman J. Fertitta
___________________________
Tilman J. Fertitta
Chairman of the Board of Directors
President and Chief Executive Officer
(Principal Executive Officer)
/s/ Paul S. West
___________________________
Paul S. West
Vice President-Finance and Chief Financial Officer
(Principal Financial and Accounting Officer)
Dated: August 5, 1996
--------------
19
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